Washington, DC
March 5, 2008
Continuing high crude-oil prices
and new bioenergy mandates, such as the U.S. Energy Independence
and Security Act of 2007, are expected to sustain prices at
historic highs across all agricultural commodities over the next
decade. This is according to analysts with the
Food and Agricultural Policy
Research Institute (FAPRI), who briefed Congress this week
on their new 10-year projections for U.S. and international
commodity markets.
Global net trade in ethanol is projected to increase by 2.53
billion gallons, reaching 3.61 billion gallons by 2017. New
biodiesel mandates in the Americas and Europe almost double the
price of biodiesel, pushing it to $6 per gallon with the
doubling of net trade over the next decade. In the projection
for ethanol, FAPRI expects the world ethanol price to fall over
the first half of the decade because of strong supplies
encouraged by previous price increases. Thereafter, growing
demand strengthens the price again through 2017, and it ends at
a projected $1.52 per gallon.
Although recent market turbulence and high crude-oil prices have
clouded prospects, the 10-year outlook for the global economy
continues to be strong, with a 3.3 percent average annual rate
of real growth in gross domestic product. Downside risk in the
outlook is seen in the U.S. economy where rising energy and food
prices coupled with recent difficulties in the financial and
real estate markets restrict growth in 2008 to only 1.90
percent. These problems affect economies in the rest of the
world, especially in Western Europe and Latin America.
The brightest spot in the outlook is the exceptionally solid
growth expected in Asian economies. The highest growth rates
(7.4 to 8.2 percent) are projected for China, Vietnam and India
for the decade. The outlook shows the U.S. dollar depreciating
(inflation adjusted) against the currencies of most countries
that consume or compete in international export markets, with
the exception of the Brazilian real.
The world corn price increased dramatically in 2007/08, to
$198.17 per metric ton, because of demand from ethanol and
livestock sectors and sustained exports. FAPRI expects that
demand will sustain this high price level over rest of the
decade. Similarly, all vegetable oil prices soared in 2007/08
with new biodiesel mandates, and they will continue to increase
by 1.28 to 3.60 percent annually for the rest of the period.
Other highlights from FAPRI's 2008 world agricultural outlook:
All world grain markets
were characterized by higher prices in 2007/08 because of
supply shortages and an increase in demand from the emerging
biofuels sector. In particular, the world wheat price
increased to $313.55 per metric ton because of production
losses due to adverse weather. Adjustments in supply and
demand settle the wheat price at $264.05 per metric ton in
2017/18.
The price of sugar increases by 10.7 percent over the next
decade because exportable surplus is cut significantly in
the European Union as a result of its sugar reforms and in
Brazil as a result of increased production of ethanol there
from sugarcane.
Strong demand coupled with the doubling of biodiesel trade
drives up world trade within the soybean complex by 17 to 32
percent. World soybean production reaches 297 million metric
tons by 2017/18. Argentina, Brazil, and the United States
remain the dominant soybean trio, accounting for 81 percent
of world production. China, the world's largest importer of
soybeans, expands its import share to 57 percent of total
world imports by 2017/18. Palm oil remains the most widely
used edible oil, and world consumption increases by 46
percent over the next 10 years.
Sanitary and phytosanitary issues continued to affect the
world meat market in 2007. FAPRI expects that recovery from
these problems and sustained income and population growth
will lead to higher per capita meat consumption.
Consequently, projections show meat production reaching
248.5 million metric tons, and meat trade expanding to 20.9
million metric tons by the end of the decade. Recovery in
demand, along with strong grain prices, pushes all meat
prices to high levels. The outlook shows the United States
and Brazil gaining significant market shares compared to
their average levels in 2003 to 2007.
Because of strong global demand and limited growth in
supplies from major exporters, the world prices of butter,
cheese, nonfat dry milk and whole milk powder increased to
record-breaking levels in 2007. Strong prices encourage
production growth in many countries. World dairy prices
taper in the mid-term, but strong economic growth and rising
population favor higher dairy demand, which puts upward
pressure on dairy prices in the long term. Australia, New
Zealand and the European Union remain the big players in
export markets, and Argentina and Brazil expand their dairy
exports to substitute for exports that are declining in the
European Union due to policy reforms.
FAPRI is an economic research
group with centers at Iowa State University and the University
of Missouri-Columbia. The outlook projections incorporate recent
macroeconomic forecasts and currently adopted agricultural
policies.
The multi-year FAPRI projections provide a starting point for
evaluating and comparing scenarios involving macroeconomic,
policy, weather and technology variables in world agricultural
trade. More information is available at the Iowa State (http://www.fapri.iastate.edu)
and University of Missouri (http://www.fapri.missouri.edu)
FAPRI Web sites. |
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